Antitrust Law Daily Wrap Up, PRIVACY—N.D. Ill.: Arbitration ordered in Beats Music TCPA suit, (Aug 20, 2015)

By Greg Hammond, J.D.

Beats Music, LLC—a subscription-based, music streaming service—was granted its motion to stay litigation and to compel arbitration concerning alleged violations of the Telephone Consumer Protection Act (TCPA). The federal district court in Chicago determined that the present dispute falls within the scope of the arbitration clause contained in the company’s Terms of Use (Craddock v. Beats Music, LLC, August 19, 2015, Lefkow, J.).

Consumer Megan Craddock created an online account, provided her name, date of birth, cell phone number, and email address, and agreed to a Terms of Use and Privacy Policy when taking advantage of a seven-day free trial of a Beats Music cell-phone app. After receiving a text message concerning “special offers on Beats Music” and directing her to the company’s website, Craddock filed suit, claiming willful and negligent violations of the TCPA. Beats Music moved to stay the litigation and to compel arbitration under the Federal Arbitration Act, pursuant to its Terms of Use.

The dispute resolution agreement of the Terms of Use stated: (1) “Before initiating any arbitration, you and Beats Music agree to first attempt to negotiate any dispute, controversy, or claim…arising from the Policies or related to the Service informally for at least thirty (30) days” (the Negotiations section); and (2) “Any unresolved disputes arising under this Agreement shall be submitted to arbitration in the City, County, and State of California” (the Binding Arbitration section).

The parties did not dispute that a valid and enforceable arbitration agreement exists, leaving the court with only one issue: whether the present dispute falls within the scope of the arbitration clause. Craddock argued that the language of the Binding Arbitration section governs separately from the Negotiations section, limiting the reach of the arbitration clause to any “unresolved disputes arising under this Agreement.”

The court disagreed, noting that a plain reading of the two provisions is that any dispute, controversy, or claim arising from Beats Music’s policies or is related to the company’s services must be submitted to arbitration, provided that it cannot be resolved informally. This is clarified, according to the court, in the last sentence of the informal negotiations section, which states, “After thirty (30) days, either you or Beats Music may commence arbitration.”

The court further determined that the phrase “arising under this Agreement” does not limit the scope of the arbitration provision, but merely refers to the claims specified in the Negotiations section—those “arising from the Policies or related to the Service.” Because Craddock’s downloading of the app gave rise to the text message at issue, and the content of the message itself referred to Beats Music’s website, which is included in the definition of “Service” set forth in the Terms of Use, the allegations arose from the “Policies” of the Terms of Use. Craddock’s claims must therefore be arbitrated, the court concluded.

The case number is 14 C 10301.

Attorneys: Anthony Paronich (Broderick Law, PC) for Megan Craddock. Mark Steven Mester (Latham & Watkins LLP) for Beats Music, LLC.

Companies: Beats Music, LLC

Cases: Privacy IllinoisNews